Tanker Market - October 2016

Source: OPEC_RP161009 10/12/2016, Location: Europe

Average spot freight rates in the tanker market increased in September from the previous month by 23%. The average increase was driven mainly by gains registered for the Suezmax class, which benefited from higher activity in the Atlantic and cargo loading requirements in West Africa, in addition to the replacement vessel requirements. Similarly, Aframax freight rates exhibited some gains in September, though to a lesser extent than Suezmax. Aframax enhanced sentiment was detected in several markets, including the Mediterranean and North Sea, while VLCC was the exception, as its average rates dropped mostly in September, despite positive earnings on the West Africa-toEast routes, which were mainly supported by higher Suezmax rates achieved on the same route. Generally, the dirty tanker market suffered from excess availability of tankers, which prevented rates from registering worthwhile gains.

Product tanker spot freight rates continued on the same downward trend as seen in recent months, with no clear signs of recovery, declining by 10% and 12%, respectively, on the East and West directions of Suez.

Spot fixtures
Chartering activity rose during September on most routes with total spot fixtures increasing by 1.1% m-o-m and estimated OPEC spot fixtures rising by 3%, compared with the last month, to average 9.92 mb/d. A decline in fixtures was seen only for Outside Middle East fixtures, which dropped by 0.46 mb/d in September, while those for the Middle East-to-West and Middle East-to-West were higher by 14.1% and 4.2%, respectively, from the previous month, to average 5.27 mb/d and 2.5 mb/d.

Sailings and arrivals
OPEC sailings dropped by 0.02 mb/d in September from the previous month to stand at 23.66 mb/d. On the contrary, sailings from the Middle East were higher by 0.24 mb/d. As for port arrivals, arrivals in Far Eastern ports increased in September by 0.27 mb/d, while arrivals at all other ports, including North America, Europe and West Asia, were down from a month before by 0.18 mb/d, 0.11 mb/d and 0.27 mb/d, respectively.

Spot freight rates
VLCC freight rates saw gains and losses on different routes in September. VLCC activities remained mostly steady with positive volumes of fixtures, leading to a gradual enhancement in freight rates from the previous month, however, the increase in activity and the amount of fixtures during the month were met with plentiful vessel supply as was the case in recent months due to new tonnage deliveries in the current year. Therefore, spot freight rates for tankers operating on the Middle East-to-East route showed a further drop from the previous month, down by 7%, to stand at WS 35 points. Middle East-to-West spot freight rates were flat in September from the previous month, to average WS 24 points, while VLCC freight rates in West Africa edged up as the firmer Suezmax market underpinned the VLCC market and encouraged VLCC owners to push towards higher freight rates. Tankers trading on the West Africa-to-East route stood at WS 42 points in September, higher by 3% from the previous month, though still 25% lower than the same month a year earlier.

Suezmax freight rates showed remarkable enhancements in September from one month before. Despite a very quiet beginning early in September, the Suezmax market and rates picked up afterwards as activity in the Atlantic increased, combined with prompt loading requirements as replacements for late running ships. Freight rates showed great increases, mainly for first decade October loadings, where tonnage lists appeared to be relatively shorter. Cargo loading requirements in West Africa also supported freight rates. On average, Suezmax spot freight rates on the West Africa-toUSGC route increased by WS 31 points from the previous month to average 67 points. Freight rates registered for tankers operating on the Northwest Europe (NWE)-to- USGC route showed an increase of WS 18 points from the month before, to stand at WS 59 points. Suezmax freight rates on both routes showed an increase from last year.

In September, Aframax freight rates increased by 13% on average. Rates in the Baltics and North Sea firmed at the beginning of the month as a result of an active market. The firming trend continued afterwards and included the Mediterranean market as the available prompt vessels offering tightened. Therefore, spot freight rates for the Mediterranean to-Mediterranean and Mediterranean-to-NWE routes edged up by 32% and 19% to stand at WS 87 and WS 74 points, respectively. On the other hand, Caribbean-to-US East Coast (USEC) spot freight rates showed lower gains, standing at WS 92 points, up by 12% compared with a month earlier. The tighter position list was threatened by Aframax tankers ballasting on lower activity in the market, halting recent gains as they added to the available tankers list.

Clean spot freight rates
Clean tanker market sentiment showed no signs of recovery in September as spot freight rates on all reported routes developed negatively, showing a downward trend on both monthly and annual bases. On average, spot freight rates for vessels trading on East-of-Suez routes dropped by 10% from the previous month, while showing a higher decline of 12% on the West of Suez routes. The product tanker market showed a softening of rates for its tankers in all classes as activity declined. Generally, the clean tanker market reported low activity in September in both directions of Suez. In the East, spot freight rates on the Middle East-to-East and Singapore-to-East routes dropped by 20% and 1% to stand at WS 89 points and WS 117 points, respectively, as a result of weak tonnage demand. West-of-Suez freight rates for medium-range (MR) vessels on the Mediterranean-to-Mediterranean and Mediterranean-to-NWE routes decreased in September by 12% and 13% from the previous month, to average WS 99 and WS 108 points, respectively.

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